Victoria state Police Chief Commissioner Graham Ashton said on Tuesday that the gunman appeared to have acted alone and was not as part of any ongoing plot or threat.

"There is nothing that we've found thus far that would suggest to us that this was anything that was ... planned or done in concert with others," Ashton said.

The suspect, a 29-year-old Somali refugee killed an Australian man employed by an escort agency in an apartment building in the south Melbourne beach suburb of Brighton. Sounds of the gunfire caused neighbors to call police.

The gunman, named as Yacqub Khayre had booked an appointment with an escort. He called police to say he had a hostage in an apartment in the building and made threats to her if police intervened. After a twp-hour siege when police tried to negotiate, Khayre walked out of the building firing a shotgun. One police officer was shot in the neck and ear and two officers suffered wounds to their hands.

"He (Khayre) came out of the apartment with a shotgun and commenced to fire at police at the entry-way to the apartments..." Ashton said. "He's exchanged gunfire with police and has been fatally shot by police at the scene." The escort escaped unharmed.

"We're treating this as a terrorism incident," Ashton said.

Ashton said the investigation into whether the so-called "Islamic State" (IS) group was involved was ongoing, saying IS "always tend to jump up and claim responsibility every time something happens."

Known suspect

Khayre was previously known to police. He was charged over a foiled plot to attack the Holsworthy Army barracks in Sydney in 2009 but was acquitted while three others were found guilty of planning the attack.

He was on parole at the time of Monday's attack after being released from prison in late 2016 for intent to cause injury and arson.

"This is a terrorist attack by a known criminal, a man who was only recently released on parole, is a shocking, cowardly crime," said Australian Prime Minister Malcolm Turnbull in the capital, Canberra.

On watch for terrorism

Turnbull added that Monday's shooting "underlines the need for us to be constantly vigilant, never to be deterred, always defiant, in the face of Islamist terrorism."

Australian officials say they have prevented 12 attacks in the country since the threat level was raised from "possible" to "probable" in September 2014. One of those prevented would have occurred in Melbourne on Christmas 2016.

However, there have been four terrorist attacks since the threat level was increased. A teenager killed a Sydney police officer in October 2015 in what was considered a "politically motivated" attack. 

kbd/jm (AFP, Reuters)